In his article “The Growing Gap Between Rich and Poor Countries: A proposed explanation”, Sheehey negotiates the validity of a couple of theories on the correlations between both relative per worker productivity and diverging population and labor force growth rates to economic growth. In a similar investigation titled “Population Growth and Economic Growth: Some more correlations”, Barlow proposes the variable “lagged fertility” to support the correlation between population growth rates and economic growth rates as more significant than relative per worker productivity. Both pieces, though not entirely alike in scope, confirm that population growth rates’ most significant effect on economic growth is in the closeness between a country’s labor force population and it’s total population.
Sheehey’s analysis of the data provided by the Penn World Table states that in scenarios where differences in population growth rates and labor force growth rates decline over time, a decrease in the divergence of per capita income levels will occur. Particularly, this is seen as happening between high and low income countries and among low income countries exclusively; population growth falling short of labor force growth in the high income countries and exceeding it in the low income countries. Sheehey argues that this evidence is reinforced by growth regressions which indicate that population growth slows growth per capita because it increases the dependency ratio while decreasing labor force growth.
Sheehey found this situation economically favorable in the long run, as low income countries would not be caught in a “poverty trap” because of the lack of divergence between relative per worker productivity levels. Further, that as differences between population growth rates and labor force growth rates decline over time, a decrease in the divergence of per capita income levels will occur.
In the beginning of her article, Barlow agreed with the controversial argument of Julian Simon that two variable correlations between the rate of population growth and the rate of growth of per capita income usually show no significant relationship. However, she went on to add that in a three variable model with her introduced idea of “lagged fertility”, the correlation between rate of population growth and rate of growth per capita income is very positive. What the lagged fertility variable essentially does is clarify the impending implications of the short run and long run effects of population growth.
In the three variable model, lagged fertility is the net fertility rate (total fertility rate adjusted for infant mortality) averaged over the six year period beginning seventeen years before the start of the period over which economic growth is measured. According to this, higher fertility in the past causes faster growth in the labor force today. However, higher population in many countries results in decreased economic growth for the following three reasons suggested by Barlow: 1) an increase in the denominator of per capita income ratios; 2) reduction in savings rates due to higher dependency burdens; 3) reduction of female presence in the labor force.
In sum, the three variable model with Barlow’s lagged fertility is valuable because it captures both the short run negative effects and long run positive effects of fertility on the economy.